Newly supplied centres in 2024 account for the bulk of demand

• The quarterly net absorption recorded 205,700 pyeong, the highest level of the year. The North remained unchanged, while other submarkets showed positive absorption. In particular, net take-up in the West was the highest in Q4 2024 due to new completions.
• Around 68% of Q4’s net absorption was in centres completed in 2024, with new tenants from the 3PL, F&B and cosmetics sectors. Conversely, all new vacancies from tenant departures occurred in centres completed prior to 2024, implying a preference for newer facilities.

Supply pressure pushes vacancy rates to a record high after the previous quarter’s dip

• A total of 315,400 pyeong across ten logistics centres was supplied in the South-east, the South and the West. The West accounted for roughly 68% of the new stock in the quarter and included three mega-centres with a GFA exceeding 50,000 pyeong each.
• The overall SCA vacancy rate recorded 18.0%, up 94 bps q-o-q. Though positive net absorption was recorded, completions of new centres drove up the vacancy rate. The vacancy rates in the Central and the North remained unchanged with no notable leasing activity.

Logistics yield compresses 10 bps to 5.4% after four quiet quarters

• The SCA overall net effective rent rose 0.5% q-o-q to KRW 31,482. Rents increased in all districts except the Central, which saw a slight decrease. The West recorded the largest increase, with new centres generally asking higher rents than the market average.
• The investment market transaction amount was approximately KRW 798 billion. The most representative transaction was North Cheonan Logistics Center, which was purchased by Gravity Asset Management (GIC) for KRW 246.5 billion through a forward sale.

Outlook: Supply is expected to stabilise rapidly beginning in 2025

• From 2025, supply is expected to drop sharply to about 34% of the 2024 level, gradually mitigating concerns about oversupply. A decrease in vacancy rates is anticipated, particularly in the West and the Central, where only one new project each is expected in 2025.
• The BOK is expected to lower its key interest rate to the low 2% range in 2025, and the decreasing supply trend may create favourable conditions for investors. Landlords will likely be able to achieve higher net occupancy income, which has seen limited growth thus far.